Young v. Young

• Decision Date: 11 September 2008
• Docket Number: No. 79207-1.,79207-1.
• Court: Washington Supreme Court
• Parties: Judith A. YOUNG, Petitioner, v. James M. YOUNG and Shannon Young, husband and wife, Respondent, and State of Washington, Department of Labor & Industries.

191 P.3d 1258

164 Wn.2d 477

Judith A. YOUNG, Petitioner, v. James M. YOUNG and Shannon Young, husband and wife, Respondent, and State of Washington, Department of Labor & Industries.

No. 79207-1.

Supreme Court of Washington, En Banc.

Argued October 11, 2007.

Decided September 11, 2008.

Timothy R. Gosselin, Gosselin Law Office PLLC, Tacoma, WA, for Petitioner.

Matthew Bryan Edwards, Owens Davies PS, Olympia, WA, for Respondent.

SANDERS, J.

¶ 1 Judith Young brought an action to quiet title against her nephew Jim Young and his wife, Shannon Young, over property located in Thurston County. Jim and Shannon¹ counterclaimed for unjust enrichment based on improvements they made to the property. At issue is the measure of recovery in their unjust enrichment claim.

¶ 2 The trial court awarded Jim and Shannon the market value of the improvements less certain costs the trial court determined did not apply. The Court of Appeals reversed, concluding the trial court should have used the full market value as the measure of recovery. We affirm the Court of Appeals.

I. FACTS

¶ 3 The facts are undisputed. Judith runs an otter sanctuary in rural Georgia. Jim is a licensed and bonded contractor engaged in timber cutting, clearing, grading, dozing, and concrete slab construction. Jim and Shannon reside in Washington with their four children.

¶ 4 Judith expressed to Jim and Shannon her desire to move her otter sanctuary away from Georgia. In 1998 Jim became familiar with a piece of property for sale in Thurston County; the land and the buildings were in significant disrepair but Jim and Shannon thought it had characteristics suitable to Judith's needs. Jim and Shannon told Judith about the property, including its run-down condition and potential for development. The three agreed Jim and Shannon would do all the work necessary to ready the property for Judith and her otters.

¶ 5 Judith purchased the Thurston County property in 1998 for $1,050,000. Judith included Jim's name on the title in the good-faith belief this would allow Jim to obtain the necessary permits and approvals for the improvements. As a result of conversations with Judith, Jim reasonably believed Judith would pay him for his improvements to the property.

¶ 6 That year Jim and Shannon moved onto the property with Judith's knowledge and lived there rent-free. Between the purchase of the property and the time of trial, Jim and Shannon did a large amount of work on the property. They extensively remodeled the house, demolished an older farmhouse, repaired a number of outbuildings, replaced the well equipment, cleared the property, and replaced the fencing, among other projects. All of the work was of workmanlike quality or better.

¶ 7 By the spring of 2001 Jim and Shannon began to suspect Judith would not move to the Thurston County property. They contacted her to discuss the possibility of turning the property into a working cattle ranch. By June 2001 all three believed in good faith they had formed an oral agreement to develop a cattle ranch. Jim and Shannon's understanding of the agreement differed significantly from Judith's understanding, but they began to develop the cattle ranch in good faith according to their respective understandings of the agreement. By the fall of 2002 the relationship had soured and the parties had stopped communicating with each other.

¶ 8 In April 2003 Judith brought an action to quiet title in her name and to eject Jim and Shannon from the property, among other claims. Jim and Shannon counterclaimed for unjust enrichment based on the work they performed on the property, among other claims. The trial court quieted title in Judith's name.

¶ 9 The court then determined it would be unjust for Judith to retain the value of the work on the Thurston County property without compensating Jim and Shannon for it. Expert testimony established the improvements would have cost Judith $760,382 if she had hired a third-party contractor to perform them. The court also found the value of the property increased by $1,150,000 to $1,450,000, but only $750,000 to $1,050,000 of the increased value was attributable to Jim and Shannon's improvements. Neither party contests these findings.²

¶ 10 The court found the measure of recovery in an unjust enrichment claim is generally the greater of: (1) the cost to the owner of obtaining the same services from a third party, and (2) the amount the services have increased the value of the property. However, the court declined to apply this measure under the "particular circumstances of this case." Clerk's Papers (CP) at 639. Instead, it awarded Jim and Shannon the market value of the improvements, less the "general contractor's costs" listed in the cost expert's report. CP at 640. The total award was $501,866.

¶ 11 Jim and Shannon appealed. In an unpublished opinion Division Two of the Court of Appeals reversed, holding the trial court incorrectly measured recovery. It remanded for an award based on the full amount it would have cost Judith to pay a third-party to make the improvements. Young v. Young, noted at 134 Wash.App. 1033, 2006 WL 2329471, at *10-15. We granted Judith's petition for review, 160 Wash.2d 1010, 161 P.3d 1027 (2007), and affirm the Court of Appeal.

II. ANALYSIS

A

¶ 12 Jim and Shannon argue the measure of recovery is either the market value of the services provided or the increase in value attributable to their work. Judith argues the circumstances of the claimant affect the measure of recovery. Our review is de novo because the only issue is the legal standard of recovery. See Crafts v. Pitts, 161 Wash.2d 16, 22, 162 P.3d 382 (2007); Fisher Props., Inc. v. Arden-Mayfair, Inc., 106 Wash.2d 826, 843, 726 P.2d 8 (1986).

B

¶ 13 Jim and Shannon characterize the measure of recovery as "unjust enrichment" whilst Judith characterizes the measure of recovery as "quantum meruit." As an initial matter we take this opportunity to conceptually clarify the distinction between "unjust enrichment" and "quantum meruit." Washington courts have historically used these terms synonymously, but the distinction between them is legally significant. Our purpose is to standardize the nomenclature and eliminate unnecessary multiplicity of terms.³

¶ 14 The two terms are distinct approaches founded on discrete legal theories: contracts implied in law and contracts implied in fact. See Chandler v. Wash. Toll Bridge Auth., 17 Wash.2d 591, 600, 137 P.2d 97 (1943) ("[T]he law recognizes two classes of implied contracts: those implied in fact, and others implied in law."). See also Martin v. Campanaro, 156 F.2d 127, 130 n. 5 (2d Cir.1946).

¶ 15 Unjust enrichment is the method of recovery for the value of the benefit retained absent any contractual relationship because notions of fairness and justice require it. See Bailie Commc'ns, Ltd. v. Trend Bus. Sys., Inc., 61 Wash.App. 151, 160, 810 P.2d 12 (1991) ("Unjust enrichment occurs when one retains money or benefits which in justice and equity belong to another.").

¶ 16 In such situations a quasi contract is said to exist between the parties. Bill v. Gattavara, 34 Wash.2d 645, 650, 209 P.2d 457 (1949) (stating "the terms `restitution' and `unjust enrichment' are the modern designations for the older doctrine of `quasi contracts.'"); State v. Cont'l Baking Co., 72 Wash.2d 138, 143, 431 P.2d 993 (1967) ("`If the defendant be under an obligation, from the ties of natural justice, to refund; the law implies a debt, and gives this action, founded in the equity of the plaintiff's case, as it were upon a contract, (quasi ex contractu) ....'") (internal quotation marks omitted) (quoting State ex rel. Employment Sec. Bd. v. Rucker, 211 Md. 153, 157-58, 126 A.2d 846 (1956) (quoting Moses v. Macferlan, 2 Burr. 1005, 97 Eng. Rep. 676, 678 (1760))).

"Three elements must be established in order to sustain a claim based on unjust enrichment: a benefit conferred upon the defendant by the plaintiff; an appreciation or knowledge by the defendant of the benefit; and the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its value."

Bailie Commc'ns, 61 Wash.App. at 159-60, 810 P.2d 12 (quoting Black's Law Dictionary 1535-36 (6th ed.1990)). See also Lynch v. Deaconess Med. Ctr., 113 Wash.2d 162, 165, 776 P.2d 681 (1989) (stating elements as "the enrichment of the defendant must be unjust; and ... the plaintiff cannot be a mere volunteer."). In other words the elements of a contract implied in law are: (1) the defendant receives a benefit, (2) the received benefit is at the plaintiff's expense, and (3) the circumstances make it unjust for the defendant to retain the benefit without payment.

¶ 17 "Quantum meruit," on the other hand, is the method of recovering the reasonable value of services provided under a contract implied in fact.⁴ See, e.g., Eaton v. Engelcke Mfg., Inc., 37 Wash.App. 677, 681 P.2d 1312 (1984) (affirming quantum meruit award on basis of contract implied in fact); see also A.F.A.B., Inc. v. Town of Old Orchard Beach, 639 A.2d 103, 105 n. 3 (Me. 1994) ("Quantum meruit denotes recovery for the value of services or materials provided under an actual, implied-in-fact contract.").⁵

¶ 18 A contract implied in fact:

is an agreement depending for its existence on some act or conduct of the party sought to be charged and arising by implication from circumstances which, according to common understanding, show a mutual intention on the part of the parties to contract with each other. The services must be rendered under such circumstances as to indicate that the person rendering them expected to be paid therefor, and that the recipient expected, or should have expected, to pay for them.

Johnson v. Nasi, 50 Wash.2d 87, 91, 309 P.2d 380 (1957) (citing Ross v. Raymer, 32 Wash.2d 128, 137, 201 P.2d 129 (1948)). In other words the elements of a contract...